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Roche drops business merger rumors with Chugai Pharmaceutical

Posted on 27 August 2014

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Roche had business merger rumors to buy Tokyo-based Chugai Pharmaceutical Co., Ltd. appear to be tabled for now. Sources in Roche indicated the company was focused on its $8.3 billion acquisition of California-based InterMune Inc.

As reported on August 18, there was significant speculation that Roche intended to acquire Chugai Pharmaceutical Co Ltd for $10 billion. The company denied the rumors, which did not douse investors’ hopes, with shares rising 15.4% at the end of trade on the previous Friday. A number of analysts felt the $10 billion price tag was too high, estimating the company’s value at about $7 billion. Chugai’s pipeline includes Actemra®, a rheumatoid arthritis treatment, and ACE910, a medication for hemophilia. 

Instead, company sources indicate Roche will focus on its purchase of Brisbane, California-based InterMune, Inc. InterMune focuses on pulmonology and orphan fibrotic diseases. The company’s star product is pirfenidone, currently marketed in the EU and Canada as Esbriet® for treatment of idiopathic pulmonary fibrosis (IPF). Although not approved for the U.S. market, the company plans to resubmit the NDA for pirfenidone to the FDA this year. The InterMune acquisition would strengthen Roche’s portfolio of respiratory drugs.

Roche currently owns 62% of Chugai. A senior analyst, Satoshi Takaoki, with SMBC Friend Securities Co. suggested that Roche’s acquisition of InterMune had the potential to benefit Chugai. “The acquisition will probably help the company get more great drugs to sell in Japan, on top of its earnings, which are already looking better than expected.” 

Investors, however, showed disappointment over the news with Tokyo trading dropping 9.2%, the largest decline since March 2011. At close of trading in Tokyo the stock was 3,325 yen. Roche and Chugai together market Avastin, Herceptin and Tarceva cancer treatments and also co-developed Actemra, a treatment for arthritis. Chugai has had a good year, with operating profit rising 13% to 43.1 billion yen ($414 million) for the half-year mark on June 30th. 

Upon news of the InterMune acquisition, the company’s stock jumped 35% to just under $73 per share. However, there is some backlash, with three law firms looking into the deal to determine if the InterMune directors had “breached their fiduciary duties” by establishing a price-per-share lower than the company’s actual value. A statement by one of the firms, Block & Leviton LLP, in Boston, stated, “This represents a premium of barely 38 percent of InterMune’s previous closing price, far below recent premiums for pharmaceutical companies with fully developed treatments akin to InterMune’s pirfenidone.” 

View the article at Biospace



Previous dealtalk: Roche to buy 40% stake in Chugai Pharma

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